UPC Rules of Procedure Consultation Event for Stakeholders: A round-up, and a few views

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Last week, ipcopymark and ipcopyemily ventured out of the open plan, into the late summer sunshine, and headed towards Bristows’ offices for the ‘UPC Rules of Procedure Consultation Event for Stakeholders’, jointly hosted by Bristows LLP, the IPO, CIPA and the IP Federation. What unfolded was a thoroughly interesting two hours of discussion, explanation, comment and debate. The level of knowledge of the UPC among the audience was remarkably high, and it was clear that everyone in the auditorium was highly invested in the eventual content of the Rules of Procedure.

The event was chaired by Bobby Mukherjee from the IP Federation; Neil Feinson from the IPO, who is a member of the Preparatory Committee, also spoke, and the discussion panel consisted of Lord Justice Floyd, Kevin Mooney of Simmons and Simmons (both members of the Drafting Committee that has been preparing the draft of the Rules of Procedure), Alan Johnson of Bristows and Richard Vary of Nokia. A recording of the event can be found here.

Seven topics of particular interest were discussed, and below is a brief summary of the issues and commentary on each. But before we turn to these seven topics. IPCopy would like to offer some brief musings of its own on why all of this matters…

Our initial thoughts

Something that came across clearly to us in the course of the afternoon was that the Drafting Committee really do know their stuff. Name any problem that has been raised in relation to the UPC, and the Committee is, frankly, all over it: hard-wired bifurcation, the extent of an opt-out, the Malta problem. They know the niggling holes and the gaping chasms, and they are doing what they can to sort it out. But there is only so much they can do: the Agreement itself is now fixed, and as ipcopymark has already commented, in some cases there are political barriers to solutions that might seem obvious to us as onlookers.

Given the Committee’s already-detailed knowledge of the problems, the political navigation involved, and the fact that the Rules can only work within the parameters set out by the Agreement, you might find yourself asking “so what does it matter what us lot think – why do I need to submit my comments?”

There are a lot of answers to this, we think. Firstly, there are some issues of interpretation that are genuinely undecided, and the Committee would like your input (see topic 1 below for an example of this). Secondly, there are many parties to satisfy, and their interests will inevitably clash. It is important that the opinion of future UPC users is given its full weight when these matters come to a head (see topic 2 below for an example of this). Thirdly, and perhaps most importantly, IPCopy suspects that the Committee might well need to pick some battles in the future (although we would welcome correction on this point if anyone in the Rules Committee or the Preparatory Committee feels otherwise!), and to do so, it will need to know what is of the greatest importance to the potential users of the Court. Three hundred responses from stakeholders all indicating that a sunrise provision is an absolute must would not be redundant repetition, but would be a welcome indication of the importance of that provision.

The seven key topics discussed at the event were as follows. If you’d like to follow along in the Rules, the latest draft can be found here.

1. Procedural Appeals: Rule 220

Article 73(2)(b)(ii) of the Agreement states that “Procedural decisions or orders may be appealed with leave of the Court.” But what is meant by “the Court”? Is that the Court of first instance, or the Court of Appeal? The Committee would like your input on this point.

The Rule that relates to procedural Appeals is Rule 220. At the moment, Rule 220 skirts around this issue by merely reciting the wording of the Agreement. As Lord Justice Floyd commented: “…the closer the wording of the Rules is to the wording of the Agreement, the harder the Rules Committee have probably found it to agree on a particular issue!”.

The question of which Court is meant is, of course, a question of interpretation of the Agreement, and is arguably not for the Committee or the Preparatory Committee to decide. One onlooker ventured the pertinent question “why does it matter which court we think it should be?”. Kevin Mooney responded that, firstly, in his view it would be preferable to assume that the Court in question is the Court of Appeal, and secondly, that he would prefer to take a stance on the interpretation and to put in a procedure based on that stance; should the Court of Appeal reject that interpretation, then so be it, but that would be preferable to leaving the question unaddressed. He commented that a heavy weight of opinion one way or the other from stakeholders would embolden the Committee to put in such a procedure.

Richard Vary made an excellent point regarding the interpretation of this Article of the Agreement: that “the Court” should be interpreted as the Court of Appeal rather than the Court if First Instance because the last person who should be deciding whether or not a decision should be appealed is the person who is deciding.

IPCopy is inclined to agree with both Kevin Mooney and Richard Vary in this regard.

2. Opt outs – Rule 5

UPC followers will know that the finer points of the opt-out system is a hotly-debated topic.

Kevin Mooney commented that the Committee were of the view that the intention of the Agreement is that a patentee is opted either entirely into, or entirely out of, the UPC. By opting out, the entirety of the patent is opted out of the jurisdiction of the UPC, for the life of the patent.

At the consultation event, discussion arose in particular around the following opt-out issues:

The sunrise provisions: (See here for an explanation of the sunrise provision) Rule 5(9) provides the sunrise provision by enabling the EPO to act as an administrative body for receiving opt-out requests from patentees before the Agreement comes into effect, thereby ensuring that opt-outs can be in place from day 1 of the UPC. However, it seems that there are potential political issues with entrusting this to the EPO – there is a suggestion that the Preparatory Committee would be acting ultra vires by delegating to the EPO in this way.

The level of the opt-out fee: The question of how much the opt-out fee should be sparked some heart-felt debate. The UPC has to finance itself, and the opt-out fee would be a source of income in the early stages, both to cover the costs of opt-out process itself, and potentially to cover other costs of the court. However, patentees generally feel that a high opt-out fee would be unfair. The Committee is keen to know our feelings on this point. The feeling from the audience was almost, but not quite, unanimously that either there should be no opt-out fee at all, or that it should be sufficient to cover the genuine administrative burden of the opt-out process, but no higher than that. There was a reasonably popular suggestion that the fee for withdrawing the opt-out could be higher, since this would be a change of stance on the part of the patentee, and would presumably be for tactical reasons. Even more popular was the suggestion that the default position should be an opted-out position, since this would maintain the status quo without action or costs on the part of the patentee, and that a fee should instead be paid to opt in to the jurisdiction of the UPC.

Something that IPCopy was interested to hear from Neil Feinson of the UKIPO was that the level of the opt out fee is not likely to be set for some time; the level of Court fees is the subject of much political debate, and a decision on the opt-out fee will probably come on the ‘back end’ of this, so an early resolution is unlikely.

3. Stays of Procedure – Rule 70

This issue is perhaps best illustrated by way of a hypothetical example:

Company A issues a revocation action at the Central Division against Company B’s patent. Company B then chooses to begin an infringement action against Company A in a Local Division. Company A could counter-claim at the Local Division for revocation, which could lead to two simultaneous actions in which Company B’s patent might be revoked. This situation is undesirable, and so the current draft Rules includes a provision in Rule 70 by which Central Division revocation proceedings are automatically stayed if an infringement action is brought in the Local Division, and the stay is lifted if no counter-claim for revocation is filed.

The Committee would like your views as to whether this mandatory stay is the best way of dealing with this problem? Should the stay be discretionary instead, and a decision made at the point of the bifurcation decision in the Local Division – perhaps to depend on factors such as the progress of the Central Division action compared to the Local Division action?

This is a complicated issue, but it attracted little comment from the floor. Hopefully everyone is still mulling this one over – if you’d like some food for thought, we will direct you to Alan Johnson’s excellent article on this subject here.

4. Bifurcation – Rules 37, 118, 47(5) and 25(3)

Bifurcation is, of course, another favourite topic of UPC followers, and you can find extensive writings on the subject, for example here.

The issue of hard-wired bifurcation when an infringement action is brought by a licensee rather than a patentee was discussed, and Kevin Mooney pointed out that the current draft of the rules attempts to circumvent this by means of Rule 25(3) that the patentee be joined to proceedings if a counter-claim from revocation is brought against a licensee.

The overwhelming feeling from the floor was that a greater degree of clarity in the Rules regarding bifurcation would be highly preferable: the message was quite firmly that the less that is left to the discretion of the Court, the better.

5. Forum shopping – Rule 19

In many cases, a Claimant will have a choice of several courts in which he may bring an infringement action. The courts will be in different countries, and will have different languages of procedure. A savvy Claimant might use this to his advantage: he might deliberately opt to use a court more or less likely to bifurcate, more likely to award an interim injunction, or that uses a language that would be particularly inconvenient to the Defendant.

Richard Vary’s suggestion is that the Rules of Procedure should include a provision for transferring the action to the court that is deemed the most appropriate court to hear the case. This would be equivalent to Rule 30 of the Civil Procedure Rules.

Comments from the floor were generally in favour of this provision, although the need to ensure that the process is quick and simple was highlighted, with the US system mentioned as an inefficient and costly example that is to be avoided.

6. Preliminary Injunctions – Rule 211

It was clear that there were strong feelings in the room when it came to preliminary injunctions.

The message from many was that the criteria for granting preliminary injunctions was not sufficiently clear from the current draft of the Rules of Procedure. As with bifurcation, the general consensus was that as much of the decision-making process as possible should be set out in the Rules, and that as little as possible should be left to the discretion of the Court.

Some felt in particular that the language of the Rules (for example, Rule 211(3), which states that “…the Court shall have the discretion to weigh up the interests of the parties…” left too much open to the interpretation of the Courts, and did not offer sufficient predictability. It was clear that there was a certain amount of debate amongst the members of the Rules Committee over the criteria for preliminary injunctions, stemming mainly from the fact that the approach varies widely across Europe.

7. Language – Rule 14

The final topic was the language of the proceedings of the UPC. Local and regional division can designate their own languages of proceedings (so long as they are official EU languages), and they may designate more than two. In this case, the criteria for deciding which language should be used is set out in Rule 14. Rule 14(2) has been identified as being particularly problematic: it states that the claim should be drawn up in “the language in which the defendant normally conducts its business in its Contracting Member State”

Kevin Mooney’s feelings were that this wording lacked clarity, and the ambiguity could lead to problems.

So, those were the highlights of the discussions of the day. Feel free to comment below if you were there and think we’ve missed anything, or if you have any comments on the issues that were discussed.

Our closing thoughts

To round up, IPCopy would like to offer an observation.

You might have noticed a common theme emerging in many of the topics mentioned above. The comment often heard from the floor was “please set out the criteria for bifurcation/preliminary injunctions/stays of procedure/transfers of cases as clearly as possible, so that as little as possible is left up to the Courts themselves”.

It was clear throughout the afternoon that what potential users ultimately want from the UPC in the long term is reliable, uniform and transparent application of the law. Claimants and Defendants alike want legal predictability, so that they will be in a position to take a reasonable view on their chances of a desirable outcome in a UPC case. Am I likely to get an interim injunction awarded? What is the risk of a finding of invalidity? How much is this case likely to cost me? Will it bifurcate – and will that cost me more?

This is of course important for the cases that are heard in the UPC, but it is also important in encouraging parties to come to out-of-court settlements, or even in encouraging parties to settle their difference without ever getting as far as filing a claim at the UPC. It is perhaps easy to forget amongst all of this that a key aim of any court should be to encourage parties to settle their differences themselves, without actually needing to use the court at all. A reasonable level of legal predictability in the courts gives the parties a reasonable level of confidence that they will, or won’t, get the outcome they want, and puts them in a position where they are more comfortable negotiating a settlement.

And how do we get this legal predictability? Well, in the short term, a clear set of Rules of Procedure will help. Ultimately, though, the UPC will need to develop a body of case law, and the Court of Appeal will need to enforce uniform application of the law in the various divisions. The sooner this happens, the better, but it will take time, and it will need cases to be heard by the UPC to make it happen. Put simply, the UPC needs to be used: as much as possible, and as soon as possible.

It was clear from the consultation event that, for many, some aspects of the Rules of Procedure will impact their inclination to use the UPC. Getting the Rules of Procedure right will therefore be one important factor in encouraging the much-needed early use of the UPC. And to get the Rules right, the Preparatory Committee need to be armed with as much knowledge as possible as to what will make patentees more, or less, inclined to use the UPC. What are the critical factors for you, or your clients? Is it clarity in deciding the award of interim injunctions? Is it knowing that a case will be heard in the most appropriate court? Does it just come down to the fees?